Technical Analysis Vs Fundamental AnalysisTA Vs FA
Both Technical and Fundamental analysis seeks to evaluate an asset.
In my opinion, these 2 major analysis methods are similar more than you think!
FUNDAMENTAL ANALYSIS
The FA involves the financial analysis of an asset by focusing on the underlying factors that affect that asset.
The assumption behind fundamental analysis is that the market does not always value assets (shares commodities, crypto, etc) correctly in the short term. Fundamental analysers try to identify the intrinsic value of assets to buy at a discount or sell at a high.
They believe their investment will pay off over time once the market realises the fundamental value of an asset.
TECHNICAL ANALYSIS:
The technical analysis seeks to evaluate a company by:
Using historical price, and
Using Volume data
to assess where the price of a security or market will move in the future.
This means technical analysers are looking at past patterns and trends to see if they are repeatable in the future.
one of the most important items in TA is the trend which shows a continuation of the current situation.
WHY DO I THINK THESE 2 ARE VERY ALIKE?
As mentioned, Fundamental analysis tries to identify the true value of an asset. For example for a company share price, FA will look at the company's balance sheet, cash flow statement, earnings reports, etc.
The technical analysis considers that there is no need to do this hard work as a company’s fundamentals are already accounted for in the price, and the information is reflected in the company’s charts. So we need to look at charts and use indicators to find the best entry prices and the market will follow the trend.
Many times if a financial report surprises traders we will see a spike in the price and depending on the nature of that news and other reports price may change direction or continue the previous trend.
